DeFi’s May: Cloudy with some Sun

May 2022 is a month best forgotten in the world of DeFi, and crypto generally. The Total Value Locked (TVL) across the sector plummeted more than 40% in the month to $111.4B, according to data from DeFi Llama.

This swift decline was mostly caused by the collapse of Terra and its UST stablecoin. The upshot was $28 billion lost from the markets in May, and Ethereum lost $40 billion. The ‘alternative to Ethereum’ Layer 1 protocols offering cheaper smart contracts also declined in terms of TVL: Avalanche lost $5 billion, and Binanace Smart Chain dropped by $3 billion. 

Any protocol associated with stablecoins was hard hit, due to UST’s demise. Investors jumped ship from several, including Curve. This decentralized exchange was designed to facilitate efficient stablecoin trading. However, it lost its position as the largest DeFi protocol by cross-chain TVL amid the downturn, with its TVL crashing by more than 50% in one month. As it currently stands, Curve’s TVL is $8.9 billion, which is a long way from its January record of $24 billion. Convex, a protocol that offers additional rewards to Curve liquidity providers, also lost close to half of its TVL in May. It now ranks in sixth place with $5.3 billion in liquidity, slumping from its number two position in January with a  TVL of $21 billion.

Tron defies the trend

On the other hand, Justin Sun’s Tron network has bucked the trend. Tron’s TVL is up 43% in the last two weeks and it is now the third-largest smart contract network, according to DeFi Llama. The bulk of its growth can be attributed to the network’s leading protocol, JustLend, which has grown 65% during the month. JustLend’s $2.95 billion TVL represents 49% of the value locked on Tron, and positions the protocol as the ninth-largest overall.

Tron’s USDD stablecoin

Tron’s stablecoin is the USDD. According to recent tweets, the total supply of USDD surpassed $600 million within the first month of launching. It is an algorithmic stablecoin on TRC20. The success of USDD has partly contributed to the rise in Tron’s TVL. And on 28th May, Justin Sun, the founder of Tron, has been tweeting that a big announcement for USDD is coming next week.

Before the Terra crisis, UST’s success prompted new entrants to explore stablecoins on the crypto market. TRON released the USDD stablecoin on 5th May and has since attracted industry attention. The stablecoin is meant to reward arbitrageurs to keep its price closely pegged to that of the U.S. dollar by trading between TRX, TRON’s token and USDD, sharing similarities with Terra’s UST, both being algorithmic. This doesn’t appear to have deterred investors. USDD is currently ranked 73rd in terms of market capitalization, according to CoinMarketCap data, with a market cap of $603 million.

USDD is currently ranked 73rd in terms of market capitalization, according to CoinMarketCap data, with a market cap of $603 million.

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